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Subject:  Re: Getting cash from a stock portfolio Date:  6/12/2000  12:50 PM
Author:  billjam Number:  4198 of 20640

You say "I am comfortable holding 100% equities."

I really advise against this if you are going use the portfolio for regular living expenses. How comfortable are you going to be when you have to sell into a market that's down 25% and still falling so you can meet expenses. I suggest you figure how much dividend income you will receive each year and subtract that from your total cash needs. That's how much you'll have to sell each year to meet expenses.

Next sell enough to raise two year's cash needs (you can spread your sales out if you think the market is going to rise). Put that money into a money market mutual fund. They pay 6%+ right now. Withdraw from the money market fund as you need cash. Most have checkwriting privileges available. That plus your dividends will fund your expenses. Each year sell enough stock to cover another year's cash requirements.

This strategy should keep you from having to sell into a bear market as you will always have a couple years cash needs covered. Learning to do this was the hardest adjustment for me when I retired. Until then I always stayed fully invested, reasoning that I could ride out a bear market. Now, knowing I will need cash on a regular basis, I keep 4 or 5% of my portfolio liquid. I replenish it whenever the market looks strong so I don't get caught in a sudden downturn. My portfolio dropped 16% in a week in April. I never lost a wink of sleep. It's recovered about half the loss since then but I'm still glad I have that cash balance available.

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